African carriers likely to make small losses in 2018, says IATA

The International Air Transport Association (IATA) has predicted that African carriers collectively are likely to make small losses of about 100 million dollars in 2018.

A statement issued by Alexandre de Juniac, IATA’s Director-General, on Tuesday, in Geneva, a copy of which was made available to journalists in Abuja, said the forecast followed a collective net loss of 100 million dollars by the airlines in 2017.

Juniac said a stronger forecast economic growth in the region was expected to support demand growth of eight per cent in 2018, slightly out-pacing the announced capacity expansion of 7.5 per cent.

He said that the wider economic situation was only improving slowly in Africa, which hampered the financial performance of its airlines.

According to the forecast, the key Nigerian economy is only just out of recession and growth in South Africa remains extremely weak.

“While traffic is growing, passengers load factors for African airlines are just over 70 per cent which is over 10 percentage points lower than the industry average.
“With high fixed costs, this low utilisation makes it very difficult to make profit.

“Stronger economic growth will help in 2018, but the continent’s governments need a concerted effort to further liberalise to promote growth of intra-Africa connectivity,’’ he said.

Juniac said that strong demand, efficiency and reduced interest payments would help airlines improve net profitability in 2018, in spite rising costs.

According to him, 2018 is expected to be the fourth consecutive year of sustainable profits with a return on invested capital exceeding the industry’s average cost of capital.